Dealbreaker - A Wall Street Tabloid - Business News Headlines and Financial Gossip

Posted by Equity Private, Apr 18, 2008, 10:30am

Over on D-Squared Digest, Daniel Davies challenges all comers to a round of "moron poker," wherein the participants "on-up" each other with links to the bottom stories of the day- the more daft, the better. We think it should be called "Moron Hearts" instead, technically, but, ok, we're game. We are certainly (and proudly) the Street's clearing house for all things moronic.

His lead is with this piece by Alice Miles on subprime. Following the rules, we'll cite this piece over on The Consumerist, previously seen in our very own "write-offs," insisting that the repeal of Glass-Steagall is responsible for all our subprime woes.

We would normally ask you to ignore the fact that the central tenant of the Consumerist piece is just plain false, (or point out that it's just a rehash of Robert Kuttner's argument with a more limited vocabulary) but this is exactly what makes the piece a "moron poker" winner.

Separating commercial and investment banking would hardly stop consolidation (Citi and Travelers were joined before the act "died," for instance. It hasn't technically been "repealed." Regulation Q and FDIC remain, for example.) or prevent a commercial bank from making moronic loans. It helps to notice that Countrywide would have been quite Glass-Steagall compliant without much changing their behavior. No one seems to invoke Banker's Trust in the discussion either. Most big investment banks have their commercial operations dwarfed by their investing activities. The original goal, to insulate cash-depositors from investment risk, is far better served by the FDIC than discouraging investment in favor of cash savings. Finally, commercial banks aren't the problem in this crisis at all.

What Glass-Steagall would do is make it near impossible to inject liquidity into Countrywide, Bear Stearns, or any other failing institution- subprime related or not. Do proponents of such things (Keynesians) suggest we simply ban securitization? Who knows.

Who's For A Game Of Moron Poker [D-Squared]

Comments

Posted by guest, Apr 18, 2008 11:12AM

> But the point of the original post is that without the repeal of G-S there would be no need to inject liquidity. Nothing like a little tautology to spice up your friday morn.

Posted by guest, Apr 18, 2008 11:24AM

What is an "on-up"? Jeffersons reference, I assume, but can't make the connection.

Posted by redpandot, Apr 18, 2008 11:27AM

i think its "one- up"?

Posted by ep, Apr 18, 2008 11:29AM

"But the point of the original post is that without the repeal of G-S there would be no need to inject liquidity. Nothing like a little tautology to spice up your friday morn."

Right, cause we never saw liquidity crisis issues before the repeal of "G-S."

(Ahem... LTCM, S&L crisis... etc. etc.)

The tautology point is in the original argument, that "G-S":

1. Solves all risk taking ills.
2. Is the snake oil that cures every other financial malady.
3. Kept the financial world safe from... anything at all.

Posted by guest, Apr 18, 2008 11:32AM

I'm not saying WaMu should be shorted, but some of you just might consider it as an investing idea:

http://consumerist.com/380959/wamu-sorry-we-dont-have-your-4200-in-cash-want-a-check

Posted by guest, Apr 18, 2008 11:34AM

Isn't it interesting that WaMu is traded as WMI on foreign exchanges, but WM on NYSE - because Waste Managmement has WMI? How appropriate. Perhaps these two garabage companies can merge so WaMu can standardize their trading symbol.

Posted by diablo, Apr 18, 2008 12:03PM

The Consumerist piece really simplified a complex issue. So I agree that it was moronic. However, it did resonate with most readers over there if you read their comments. Didn't you notice that this piece gave them a huge leg to stand up to say "it's all Clinton's fault" once again? Morons!

Posted by guest, Apr 22, 2008 2:38AM

I think you're right, EP; but, get your evidence in order. LTCM happened after the BT and JPM exceptions and after Citi and Travelers announced.

S&L crisis isn't a bad example; but, that's broad-based. Silverado? Puh-lease. The best example is a single huge commercial bank: Continental Illinois. Glass-Steagall did nothing to stop that well-monitored bank from failing.

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